An Alternative to Traditional Markets. By Todd Ryden, CEO of FNEX

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1 An Alternative to Traditional Markets By Todd Ryden, CEO of FNEX 1

2 About the Author Todd Ryden is an experienced entrepreneur and manager, having founded and sold several enterprises. After practicing law, Mr. Ryden co-founded StarCom Broadband, a cable and high-speed data provider. StarCom was sold in 2001 to Comcast. He then co-founded Cole Marketing, a bottled water brandmarketing group, acquired in 2006 by a New York based venture capital group. Later he co-founded Caldera Development, a real estate development company that has participated in the development of over 430,000 square feet of retail and office space. And he was a co-founder of ViaStar Energy, which provided utility management services nationwide. Motorola acquired ViaStar s Automated Meter Reading technology in 2007 and NWP Services Corp acquired its utility services division in Today, Todd is the Managing Director of The Applied Group, a private equity firm. Prior to entering the business world, Todd s legal career included litigating at the Indiana Supreme Court, and representing the State of Indiana in the tobacco litigation. He obtained his Juris Doctorate from Indiana University School of Law in Indianapolis, has a certificate in International Contract Law from Tulane University, Paris, France, and obtained his B.A. from Purdue University. He has been a member of the American and Indiana Bar Associations, serves as President of the Board of Directors of Big Brothers and Big Sisters of Central Indiana, is a Board Member of Christel House s Drop Out Recovery School and has been a guest lecturer at Purdue University, Ball State University and the University of Indianapolis. 2

3 Finding an Alternative to Traditional Investments By Todd Ryden CEO of FNEX THROUGHOUT my professional life, I ve chosen several career and business paths. I ve gone from law to broadband cable, wireless technology to business process outsourcing. Today, I run a small private equity group with my partner. And we recently launched FNEX. FNEX is the first alternative investment in the private-securities marketplace that is actually and practically transactional. It s the first platform where you can source curated content on a broad array of alternatives, evaluate them, transact, and actually direct the flow of funds. Exposure to alternatives is more relevant today than ever before. The state of the U.S. economy is as concerning as are the unprecedented historical changes occurring in the global economy. This means you have to inform yourself and dive in behind the headline information. When someone is warned that they shouldn t have all their money in stocks and their reply is that they don t because they re in mutual funds, I wince. But for most of our investing public, that s a pretty accurate scenario. They work hard every day and invest in their 60/40 equity-bond split. They probably speak to their advisor on a quarterly basis and listen to the headline information. Worse yet, they believe it. The Economic Illusion Today, there s a strong disconnect between the real state of the market and that of the underlying economy. And there s a battle going on between the inflationists and the deflationists. Granted, a good case can be made for both because they re occurring simultaneously. However, that puts the average investor in a precarious position. So what does he do? He turns to the headlines, which encourage him to think that everything is great on the S&P, Nasdaq, and the Dow. I assure you everything is NOT great. The reality is that everything is frothy... pushing investors from one precarious position into one that s outright dangerous. Yes, there has been a slight recovery in real estate; bond prices have recovered and are expensive. Commodities are expensive. Even junk bonds are performing miraculously. Moody s composite speculative-grade bond index is at a historical low yield of 4.93%. We re seeing some cases of inflationary pressures in the market but they re probably burgeoning out of this artificial sea of liquidity brought on by quantitative easing (QE). The money is going to the banks. It s finding its way across multiple asset classes. Everything is getting expensive and the average investor is moving in to riskier assets. 3

4 Behind the Headlines The thing is, there s a huge difference from what s announced in the headlines to what s really happening. When we look at the Shiller Cyclically Adjusted Price to Earnings index, we know that anytime we get around the 25 level, there seems to be a reversion to the means, as you can see for yourself. According to USA Today, there s $1.2 trillion sitting on corporate balance sheets. When confidence comes back into the market, everyone is going to begin spending the economic engine is going to begin churning. That sounds great except for the fact that U.S. corporate cash holdings are at their lowest in 15 years relative to corporate debt. Corporations have been binging on debt with record-low interest rates. Then they ve been using that debt to buy back their own stock. In 2013, S&P companies bought $500 billion worth of their own stock. In the first six months of 2014, over $330 billion was spent by corporations buying their own stock. We have a greater number of repurchasing programs occurring now than we did in 2008! That s unsustainable. Unfortunately, that also coincides with a lopsided insider sales-to-buy ratio. During September and October 2014, there were 47 sellers for every buyer. That s another warning flag. Breaking Down the Numbers The Average Retail Consumer makes up 70% of our GDP. But the impacts of inflationary price pressures and the lowest participation rate in the labor force since 1978 is hampering their ability and desire to spend. Most agree that 18- to 34-year-olds constitute a pretty significant portion of our spending population. They re a significant driving force. They re the ones who are going to take care of most of us pretty soon. 4

5 The bad news is that this group has the highest level of unemployment and many of them live at home with their parents. Many are also straddled with unmanageable student loans. These kids aren t buying houses. They re not driving the economy forward as they should be. Real household median income has been on a steady decline since In truth, it s been flat-lining since the late 1960s. Clearly everything is not as good as those headlines make out. The QE Effect Then there s the flood of liquidity, bank balance sheets and rising asset prices to consider. Everything the basic consumer has spent has been based on a credit card and unfortunately he s reached his limit. The culprit behind this, of course, is quantitative easing and stimulus. Every man, woman, and child in the U.S. basically owes $53,000 of balance sheet debt now. We re in unsustainable territory. There s nothing left to buoy asset prices. In short, this is a historic time, economically speaking. A time when diversifying into non-correlated assets, maybe even non-u.s. based or non U.S. dollar-denominated assets has become crucial. And that s where FNEX comes in. A Truly Transactional Marketplace Back in 1997, there were 8,884 stocks on U.S. exchanges. Today there are 5,008. That s 44% less. And it s because companies are staying private longer. They don t want to go public and when they do it s for a different reason than their predecessors. It s for liquidity cashing out. That s why FNEX enables investors to make direct investments into private companies, hedge funds, managed futures programs, and other alternatives sourced directly from investment banks, fund managers, and commodity trading advisors. We ve got over 200 investment banking offices that list their primary raises for private companies on the platform. We ve got large secondary transactions on the platform. At FNEX, we re trying to give everybody the opportunity to invest like an institutional investor. To sign-up, go to FNEX.com, create your free account, and get started today! 5

6 Publisher... Shannon Sands Editors... Harry Dent and Rodney Johnson Portfolio Manager... Adam O Dell Dent Research 55 NE 5th Avenue, Suite 200 Delray Beach, FL USA USA Toll Free Tel.: (888) Contact: Website: Legal Notice: This work is based on what we ve learned as financial journalists. It may contain errors and you should not base investment decisions solely on what you read here. It s your money and your responsibility. Nothing herein should be considered personalized investment advice. Although our employees may answer general customer service questions, they are not licensed to address your particular investment situation. Our track record is based on hypothetical results and may not reflect the same results as actual trades. Likewise, past performance is no guarantee of future returns. Certain investments such as futures, options, and currency trading carry large potential rewards but also large potential risk. Don t trade in these markets with money you can t afford to lose. Delray Publishing expressly forbids its writers from having a financial interest in their own securities or commodities recommendations to readers. Such recommendations may be traded, however, by other editors, Delray Publishing, its affiliated entities, employees, and agents, but only after waiting 24 hours after an internet broadcast or 72 hours after a publication only circulated through the mail. Also, please note that due to our commercial relationship with EverBank, we may receive compensation if you choose to invest in any of their offerings. (c) 2014 Delray Publishing. All Rights Reserved. Protected by copyright laws of the United States and international treaties. This Newsletter may only be used pursuant to the subscription agreement. Any reproduction, copying, or redistribution, (electronic or otherwise) in whole or in part, is strictly prohibited without the express written permission of Delray Publishing. 55 NE 5th Avenue, Suite 200, Delray Beach, FL

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